Positive Forecast For Pound Australian Dollar Exchange Rate; GBP/AUD 3 1/2 Month Low Today

March 26, 2014 - Written by Frank Davies

STORY LINK Positive Forecast For Pound Australian Dollar Exchange Rate; GBP/AUD 3 1/2 Month Low Today

The Australian Dollar has well and truly poked its head above the parapet during today’s trading session. The Pound Aussie exchange rate has slumped to a fresh 3 ½ month low at 1.7897 GBP/AUD this afternoon, while the Australian Dollar US Dollar exchange rate has spiralled to 0.9246 AUD/USD. The Aussie has not been as strong as this against the Buck since 22nd November and it is a cent and a quarter above yesterday’s opening level.
The spike higher for the Australian unit began when the Reserve Bank of Australia changed its tone some 6 weeks ago. For the months leading up to February’s policy announcement, the RBA had been bemoaning the Aussie’s relative strength, blaming it for the slowdown in the domestic economic due to the decimating effect it was having on Australian exports.

However, RBA Governor Glenn Stevens ditched the assertion that the Australian tender was too strong for his economy’s good at the RBA’s February meeting when he suggested that the local currency was not at an appropriate level once again. During the final week of January, the AUD USD exchange rate was loitering in the 0.86s, however the apparent change of tack by Stevens, which investors took as a sign that there was no longer a danger of further interest rate cuts in the Antipodean nation, propelled the pair sharply forwards.

The forward shift for the Aussie is by no means guaranteed to prevail. The sustained support for the AUD during recent weeks appears likely to have spooked the Reserve Bank of Australia – it’s worth noting that recent rhetoric from the RBA has simply asserted the AUD was at an ‘appropriate level’ some six weeks ago. Expect Glenn Stevens and his Deputy Philip Lowe to gently begin attempting to ‘talk down’ the Aussie in coming weeks. The forecast for the AUD therefore remains NEUTRAL TO NEGATIVE.

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